Official: Rural Oregon’s economy ‘dire,’ but not hopeless

State economist says rural Oregon counties are in a self-perpetuating cycle of losing jobs and talented young workers.

By Eric Mortenson

Capital Press

Published on January 24, 2014 9:24AM

Last changed on January 24, 2014 2:26PM

Mark McMullen

SALEM – Damage inflicted on rural Oregon’s economy during the recession will “soon become irreversible” if it continues to lose talented young workers to the state’s urban areas, the state economist said.

The state’s rural areas are stuck in a “negative, perpetuating cycle” in which young people leave because they can’t find jobs and companies don’t move in because the workforce is leaving, said Mark McMullen, with the state Office of Economic Analysis. In some rural counties, deaths now exceed births, and an aging demographic dim economic growth.

Counties that have resisted that trend, such as Hood River, Marion and Morrow, have done so by attracting Latino families, which tend to be younger, McMullen said.

Speaking Thursday to the board of directors of the EO Media Group, McMullen said Portland and Oregon’s rural counties each lost about 8 percent of jobs during the recession, but Portland has largely recovered. Rural areas are just now beginning to regain jobs, McMullen said.

Portland’s advantage has been its more diverse economy. While rural areas rely heavily on government employment and construction, “Portland also has advertising executives and ballet dancers,” he said.

The city attracts high tech and other ambitious, skilled workers – many of whom came from rural Oregon, he said.

“Rural Oregon is a tremendous place to raise workers,” McMullen said. A study showed that a person born in John Day in 1970 had a one in seven chance of being in Oregon’s highest income group today. A person born in east Portland at the same time, however, had only a one in 11 chance.

Workers from Oregon’s rural areas come to Portland looking for opportunity and with expectations of success. “You might be poor, but you have examples of (successful) folks to follow,” he said, while disenfranchised groups living in Portland’s impoverished neighborhoods don’t see such prospects.

Three factors made that so: Federal spending, especially the millions spent to destroy chemical weapons at the Umatilla Depot; extensive wind farm development; and the high price of wheat, which in turn triggered farmers to buy new equipment. “As goes the price of wheat, so goes Pendleton, I’ve been told,” McMullen quipped.

But the bloom is off that rose, McMullen said. The cleanup project is finished, wheat prices have slipped back toward normal and wind energy development is stalled.

“All those tailwinds have kind of gone away, so they’re coming back to earth,” McMullen said of the northeast counties.

McMullen pointed out some economic bright spots. Agriculture has been “surprisingly strong,” he said, and a January report by the land-use group 1000 Friends of Oregon backs that up, estimating that $5.8 billion worth of farm and ranch products induces $22 billion in goods and services annually.

The same report showed the staying power of food processing in particular. From 2007 to 2012, during the depth of the recession, Oregon’s manufacturing sector as a whole lost 15.8 percent of its jobs. But food manufacturing jobs increased 7.8 percent during that same period.

“That’s something we’re having hard time getting a grip on,” McMullen said during his talk. “The conventional wisdom is that they were dead. But then something happened in terms of competitiveness, a change in crops, and now they’re bigger then ever and there are more operations in the off-season, which is encouraging.”

Oregon’s north coast kept going with an increase in exports, he said. Commercial fishing, a high value-added industry, did well in bad times but in terms of raw numbers is not a big part of the state’s economy, he said. Also, a growing number of professional service jobs can be done remotely from rural areas, but the impact at this time is unclear, McMullen said.

Japan’s economic growth rate, projected at 7 percent after years of stagnation, is good news for segments of Oregon’s exporters, such as wheat ranchers.

Economic recovery is spreading to rural areas, McMullen said, but Oregon may not regain all the jobs it lost until the end of 2014 or 2015.